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B5-6-01, HomeReady Mortgage Loan and Borrower Eligibility (04/06/2022)

This topic contains information on HomeReady mortgage loan and borrower eligibility, including:


The HomeReady mortgage is a conventional community lending mortgage that offers underwriting flexibilities to qualified borrowers who meet specific income criteria. The HomeReady mortgage is a standard product offering available to all Fannie Mae lenders. No special approvals are required.

General Loan Eligibility

A HomeReady mortgage is a first mortgage, purchase money, or limited cash-out refinance transaction for one- to four-unit properties used as the borrower’s principal residence.

Eligible properties include:

  • one-unit properties, including manufactured housing, and units in condos and PUDs;

  • units in co-ops, provided the unit conforms to Fannie Mae's requirements, and the lender has received specific authority to deliver mortgages on co-ops to Fannie Mae;

  • existing structures and new construction; and

  • two-, three-, and four-unit properties.

Additional restrictions apply to transactions with LTV, CLTV, or HCLTV ratios of 95.01 — 97%. See below for additional requirements for HomeReady mortgage transactions.

Maximum LTV, CLTV, and HCLTV Ratios

Refer to the Eligibility Matrix for maximum allowable LTV, CLTV, and HCLTV ratios for HomeReady mortgage loans. HomeReady loans that are originated in connection with manufactured homes must follow the more restrictive LTV, CLTV, and HCLTV ratios that apply. For example, the maximum LTV, CLTV, and HCLTV ratio for a one-unit HomeReady manufactured home that does not meet the MH Advantage requirements is 95%.

Requirements for HomeReady Transactions with LTV, CLTV, or HCLTV Ratios of 95.01 – 97%

If the LTV, CLTV, or HCLTV ratio exceeds 95% for a HomeReady transaction, the following requirements apply.

Criteria Requirements
LTV, CLTV, or HCLTV Ratio 95.01 to 97%

Note: The CLTV ratio can be up to 105% if the subordinate lien is a Community Seconds loan.

Loan Purpose Purchase transactions or limited cash-out refinances only.
Existing Loan For limited cash-out refinances:

The lender must document that the existing loan being refinanced is owned (or securitized) by Fannie Mae. Documentation may come from

  • the lender’s servicing system,

  • the current servicer (if the lender is not the servicer),

  • Fannie Mae’s Loan Lookup tool, or

  • any other source as confirmed by the lender.

The lender must inform DU that Fannie Mae owns the existing mortgage using the Owner of Existing Mortgage field in the online loan application before submitting the loan to DU.

Note: This requirement does not apply if the CLTV exceeds 95% only due to a Community Seconds loan.

Loan Type Fixed-rate loans with terms up to 30 years.

Note: High-balance and ARM loans are not permitted.

Property and Occupancy One-unit principal residence. Manufactured housing is not permitted, unless the property meets the MH Advantage requirements.

All borrowers must occupy the property unless there is a Community Seconds subordinate lien.

Credit Score Requirements At least one borrower on the loan must have a credit score.
Underwriting Method DU only
Reserves Reserves requirements will be determined by DU.
Other All other standard purchase and limited cash-out refinance and HomeReady requirements apply.

Subordinate Financing

Subordinate financing must comply with:

Subordinate financing from a seller-held mortgage is not permitted with HomeReady mortgages.

Eligible Loan Types

HomeReady mortgage transactions can be secured by fixed-rate or ARM loans.

The following table identifies the ARM plans that are available for HomeReady mortgage loans.

ARM Plans Eligible for HomeReady Mortgages
30-year Five-Year ARM 4927
Seven-Year ARM 4928
Ten-Year ARM 4929

Temporary Buydowns

The following requirements apply to temporary interest rate buydowns on HomeReady mortgages:

  • Loans must be purchase transactions.

  • Loans must be fixed-rate or seven- or ten-year ARMs.

  • All other standard buydown policies apply.

See  B2-1.4-04, Temporary Interest Rate BuydownsB2-1.4-04, Temporary Interest Rate Buydowns, for additional information.

Borrower Income Limits and Calculations

In determining whether a mortgage is eligible under the borrower income limits, the lender must count the income from all borrowers who will sign the note, to the extent that the income is considered in evaluating creditworthiness for the loan.

The lender must use the same methodology in determining income eligibility for a HomeReady mortgage as the lender uses in reporting “Monthly Income” in data delivery. Eligibility for a HomeReady mortgage loan compares the borrower’s income to the applicable area median income (AMI) for the property’s location. For determining Fannie Mae loan eligibility, lenders must refer to the AMIs that Fannie Mae uses in Desktop Underwriter or on Fannie Mae’s website and may not rely on other published versions (such as AMIs posted on

To be eligible as a HomeReady mortgage, the total annual qualifying income may not exceed 80% of the AMI for the property’s location. If the property has resale restrictions, see B5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery RequirementsB5-5.2-02, Loans with Resale Restrictions: Eligibility, Collateral and Delivery Requirements, for additional requirements.

Note: For loan casefiles that are not underwritten as a HomeReady mortgage loan, DU will issue a message indicating that the loan may be eligible as a HomeReady loan if the total qualifying income entered in DU appears to be within the applicable AMI limit for the property’s location. See B5-6-02, HomeReady Mortgage Underwriting Methods and RequirementsB5-6-02, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.

Homeownership Education and Housing Counseling

Homeownership education is required for HomeReady purchase mortgage loans when all occupying borrowers are first-time homebuyers. Refer to B2-2-06, Homeownership Education and Housing CounselingB2-2-06, Homeownership Education and Housing Counseling, for options for meeting this requirement.

HomeReady loans for which at least one borrower completed housing counseling as an alternative to homeownership education, evidenced by a signed Certificate of Completion of Housing Counseling (Form 1017), are eligible for certain benefits. See B5-6-02, HomeReady Mortgage Underwriting Methods and RequirementsB5-6-02, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SEL-2022-03 April 06, 2022
Announcement SEL-2020-07 December 16, 2020
Announcement SEL-2020-06 October 07, 2020
Announcement SEL-2020-02 April 01, 2020
Announcement SEL-2020-01 February 05, 2020
Announcement SEL-2019-08 October 02, 2019
Announcement SEL-2019-06 July 03, 2019